Strong Hospitality Sales Performance Expected To Continue Through 2018

Demand for hotels continues to rise, with California recording the highest number of hotel transactions of any state and amassing $6.22B in sales last year, according to Atlas Hospitality Group’s annual year-end California Hotel Sales Survey.

Though the total sales figures were down 6.45% from the previous year, California had 369 hotel deals in 2017, a 14.6% increase year over year, the report states. 

“We were pleasantly surprised by the amount of sales and dollar volume in 2017,” Irvine-based Atlas Hospitality Group President Alan Reay said. “2016 was a very strong year. We expected the market to take a breather and slow down but we didn’t see it in 2017.”

Reay said the strong U.S. economy, low unemployment and low interest rates are factors driving the sales of hotels. He is seeing a lot of foreign buyers from China and South Korea and investors that are exiting out of the multifamily sector and making a transition to hospitality.

“They are seeing a higher return investing in hotels than apartments,” Reay said.

Los Angeles County had the most hotel transactions in 2017 with 50 deals for $1.67B in sales. The county set a record median sales price per room of $127,211, according to the report. By room count, the 474-room Westin in Long Beach posted the largest county sale at $84.8M, or $184K/room.

In Orange County, hotel transactions increased 5%, from 22 to 23, while total dollar volume dropped 40%, from $807K to $484K year over year. The sale of the 440-room The Duke Hotel in Newport Beach for $125M accounted for the biggest and most expensive sale in the area, according to the report.

Reay said Los Angeles and Orange counties continue to be strong hotel markets. 

Looking ahead, Reay said he expects hotel sales to continue to increase in the near future.

“Everyone is bullish,” Reay said. “Especially with the new tax laws, we expect more investments coming to the U.S. All indications are 2018 prices will continue to rise.

“The only clouds on the horizon is if there is a slowdown in the economy, a rise in interest rates and labor cost and what effects or increases in minimum wage will have in the industry," he said. "Right now, it looks very strong and rosy.”